Great blog posts about macroeconomics

The Carbon Tax: Something Republicans And Democrats Can Agree Upon

2017 has been a year of extreme political polarization, but the carbon tax is something both sides can get behind. The carbon tax is a fee levied on fossil fuel usage. Through carbon taxation, users of coal, oil, and natural gas will be have to pay a fee for releasing high levels of Co2 into the air. This fee is aimed to incentivize individuals and companies into moving away from fossil fuel usage to an era of renewable energy. The tax clearly sounds favorable to the left because of its environmental benefits, but what about the right? Though Republicans tend to frown upon taxation and government intervention, the carbon tax would allow for a number of tax breaks that the right would find very favorable.

The carbon tax is a highly supported reform in the Democratic Party. The 2016 Democratic platform were avid supporters of the reform. They stated, “Democrats believe that any carbon dioxide, methane, and other greenhouse gases should be priced to reflect there negative externalities, and to accelerate the transition to a clean economy and help meet our climate goals.” This endorsement came as no surprise due to the Democrats avid support of environmental regulation. According to 2015 data from the EIA, only 10% of energy contribution comes from renewable sources while the rest comes form fossil fuels.

This data clearly shows that the U.S has generally not backed the idea of renewable energy use. However, Democrats believe the carbon tax will help spur a flip flop in these numbers because people tend to change their habits when it becomes economically inefficient not to do so. This theory holds true in the British Columbia where the carbon tax is currently in affect. According to an article by John D. Sutter of CNN, Carbon commissions in Canada have dropped from 5% to 15% since the carbon tax has been enacted. These numbers provide a bulk of legitimacy to the carbon tax’s ability to enact environmental change. However, environmental benefits is not the only positive to the carbon tax. It also offers a number of monetary benefits that will give Republicans a good reason to get behind it.

The carbon tax offers tax benefits that will greatly appeal to the Republican Party. Putting a tax on fossil fuel abusers will largely reduce a number of other taxes imposed on the American people. Gregory Mankiew, a very well respected Republican economist who served as a Chief Economic Advisor under President Bush, is an avid supporter of the carbon tax. Mankiew in an interview with National Geographic stated, “well one of the important things to keep in mind is that if you have a carbon tax, you can turn around and cut other taxes in response, for example, the payroll tax. So this is a tax shift, rather than a tax hike.”

Payroll tax cuts is something most Republicans can get behind. It will put more money in the everyday Americans pockets and benefit both the lower and middle class significantly. However, even big business fossil fuel industries are getting behind the tax. Exxon Mobil, which is the largest oil distributor in the world, has backed the carbon tax. Therefore, if a leading Republican economist and the largest oil company in the world are willing to support the carbon tax then the Republican party should be able to as well.

The Carbon tax offers a rear opportunity for both the left and the right to come together and agree on a mutual beneficial regulation. The carbon tax will decentivize fossil fuel usage which will have enormous environmental benefits making Democrats very happy. It will also create large tax cuts which supports the Republican agenda and makes everyone better off. Currently the carbon tax is not supported by President Trump and the White House due to their loyalty to the coal industry. However, it is only a matter of time till politicians truly see the environmental and economic benefits to this tax which will make both Democrats and Republicans better off.

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This was a cool article, I had never thought of a carbon tax as something that both parties could get behind. I also didn’t know that the tax would represent a tax shift and not a tax hike. It is exciting to think of the potential effects of the tax; will it spark a heavy influx of investment and jobs in renewable energy, or will its just make natural gas options like fracking more appealing?

This is a really well researched and interesting article. My only question is how a carbon tax would affect small business who don’t have the ability of bigger businesses to use energy efficient technology to cut down on carbon emissions and thus have to pay a smaller relative tax? A carbon tax could possibly have a negligible effect, but I’m sure small business owners would be worried!

In a world with two sane political parties, this policy would have been enacted already (with protections in place to help poor families that would see the largest tax increases as a percent of their income). As for small business owners, they may have little ability to change their emissions, but they also don’t emit much carbon. My guess is that they wouldn’t be severely affected.